Per Reuters, Archer Daniels Midland Co. ADM, a leading grain trader and processor, accused Canadian Pacific Railway Limited CP of service disruptions in the years 2013 and 2014 at crop-processing plants in North Dakota and Minnesota. The former has filed litigation against the Canadian railroad operator as a result.
According to ADM, the service failure was mainly triggered by Canadian Pacific’s cost-cutting strategies coupled with the company’s ongoing search for merger and acquisition deals. The court case was filed in the U.S. District Court for the Central District of Illinois.
The demand for railroads across the northern U.S. Plains is very crucial due to the lack of commercially-navigable rivers. For many years, the Canadian railroad operator has served as one of the most trusted transporters for grains.
Thus, the failure to deliver service not only affected ADM’s business but also led to several million dollars in losses. Moreover, ADM claims that Canadian Pacific failed to provide an alternative solution to railroad transportation at the time of its service disruption. ADM believes that poor management at Canadian Pacific was responsible for such huge losses.
In November last year, Canadian Pacific made a $28 billion offer to acquire Norfolk Southern Corp. NSC as it believed that the merger would generate above $1.8 billion in annual savings. However, the deal was declined by Norfolk Southern. Also in 2014, Canadian Pacific ended collaboration talks with peer CSX Corporation CSX.
Canadian Pacific currently carries a Zacks Rank #3 (Hold).
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